How to smooth shading on baked texture?
Here's what you can do:

Step o1: Set the shading to smooth.





Step o2: Add an Edge Split modifier and uncheck Edge Angle.




Step o3: Tab into Edit Mode, change selection mode to Edges, then select the edges you want to be sharp.



Step o4: Hit Ctrl + E to bring up the Edges menu and select Mark Sharp. [ The Edge Split modifier uses these marked edges ]




Step o5: And bake :]

Tip: You can add a Subdivision Surface modifier after the Edge Split modifier for added smoothness and disable it after the bake.